Lululemon Athletica, Inc. raised its earnings and sales guidance for the year after reporting first-quarter results that surpassed its expectations. Sales were up 32 percent in the first quarter with same-store sales ahead 24 percent.

Calvin McDonald, Chief Executive Officer, stated: “In the first quarter of 2022, continued momentum in the business enabled us to achieve a strong start to the year. These results provide a solid foundation as we begin our next five-year journey and deliver against our new Power of Three ×2 growth plan. I want to thank our teams around the world for remaining agile and continuing to execute at a high level to achieve our goals, while successfully navigating the challenges within the macro environment. We look forward to all that lies ahead for Lululemon as we continue to grow the brand.”

The fiscal year ending January 29, 2023 is referred to as “2022”, the fiscal year ended January 30, 2022 is referred to as “2021”, and the fiscal year ended February 2, 2020 is referred to as “2019”. The adjusted non-GAAP financial measures below exclude certain costs incurred in connection with the acquisition of Mirror and the related tax effects.

First-quarter 2022 Highlights Compared To First Quarter 2021

  • Net revenue increased 32 percent to $1.6 billion;
  • Net revenue increased 32 percent in North America and increased 29 percent globally;
  • Total comparable sales increased 28 percent, or 29 percent on a constant dollar basis;
  • Comparable store sales increased 24 percent;
  • DTC net revenue increased 32 percent, or 33 percent on a constant dollar basis;
  • DTC net revenue represented 45 percent of total net revenue compared to 44 percent for the first quarter of 2021;
  • Gross profit increased 24 percent to $870.4 million and gross margin decreased 320 basis points to 53.9 percent;
  • Income from operations increased 34 percent to $260.3 million. Adjusted income from operations increased 29 percent;
  • Operating margin increased 30 basis points to 16.1 percent. Adjusted operating margin decreased 30 basis points;
  • Income tax expenses increased 43 percent to $70.3 million. The effective tax rate for the first quarter of 2022 was 27.0 percent compared to 25.3 percent for the first quarter of 2021. The adjusted effective tax rate was 24.5 percent for the first quarter of 2021;
  • Diluted earnings per share were $1.48 compared to $1.11 in the first quarter of 2021. Adjusted diluted earnings per share were $1.16 in the first quarter of 2021;
  • The company repurchased 0.7 million shares of its own common stock at an average price of $328.40 per share for a total cost of $232.6 million; and
  • The company opened five net new company-operated stores during the first quarter, ending with 579 stores.

First-Quarter 2022 Highlights Compared To First Quarter 2019

  • Net revenue increased by $831.1 million, or 106 percent, representing a three-year compound annual growth rate of 27 percent;
  • Gross margin was consistent at 53.9 percent;
  • Operating margin decreased by 40 basis points; and
  • Diluted earnings per share were $1.48 compared to $0.74 in the first quarter of 2019.

Sales of $1.6 billion topped guidance calling for sales to be in the range of $1.525 billion to $1.550 billion. EPS of $1.48 topped company guidance in the range of $1.38 to $1.43 for the quarter.

Meghan Frank, CFO, stated: “Our teams continue to deliver strong financial performance while navigating the ongoing impacts of COVID-19, supply chain disruptions and inflationary pressures. While we are not immune to these challenges, our Omni operating model, balanced growth strategy and unique approach toward innovation enable the positive results we are reporting today and anticipate for the full year.”

Balance Sheet Highlights
The company ended the first quarter of 2022 with $649.0 million in cash and cash equivalents and the capacity under its committed revolving credit facility was $396.9 million.

Inventories at the end of the first quarter of 2022 increased 74 percent to $1.3 billion compared to $0.7 billion at the end of the first quarter of 2021. On a unit basis inventory increased 56 percent, representing a three-year compound annual growth rate of 36 percent, which is inclusive of five-percentage points for in-transit inventories. The company believes its inventories are well-positioned to support its expected revenue growth in the second quarter.

2022 Outlook
For the second quarter of 2022, the company expects net revenue to be in the range of $1.750 billion to $1.775 billion, representing a three-year compound annual growth rate of approximately 26 percent. Diluted earnings per share are expected to be in the range of $1.89 to $1.94 for the quarter and, excluding the gain on the sale of an administrative office building, adjusted diluted earnings per share are expected to be in the range of $1.82 to $1.87.

For 2022, the company expects net revenue to be in the range of $7.610 billion to $7.710 billion, representing a three-year compound annual growth rate of 24 percent to 25 percent. Diluted earnings per share are expected to be in the range of $9.42 to $9.57 for the year and, excluding the gain on the sale of an administrative office building, adjusted diluted earnings per share are expected to be in the range of $9.35 to $9.50.

Previously, Lululemon’s guidance called for sales for the year in the range of $7.490 billion to $7.615 billion. Diluted earnings per share were expected to be in the range of $9.15 to $9.35 for the year.

Photo courtesy Lululemon